What is it? How to get it? And what to do with it? Matt L. Wahrhaftig CFRE Vice President for College Advancement

Transcription

1 What is it? How to get it? And what to do with it? Matt L. Wahrhaftig CFRE Vice President for College Advancement

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3 A digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. "decentralized cryptocurrencies such as bitcoin now provide an outlet for personal wealth that is beyond restriction and confiscation - Wikipedia

4 Bitcoin was the first cryptocurrency and is now a household name. It was created in 2009 by an unknown person using the alias Satoshi Nakamoto. Transactions are made with no middle men meaning, no banks. Bitocin can be used to buy merchandise anonymously. In addition, international payments are easy and cheap because bitcoins are not tied to any country or subject to regulation. Small businesses may like them because there are no credit card fees. Some people just buy bitcoins as an investment, hoping that they ll go up in value.

5 It has no intrinsic value in that it is not redeemable for another commodity such as gold Has no physical form and exists only in the network Its supply is not determined by a central bank and the network is completely decentralized There is a finite amount of Bitcoin. There will only be 21MM issued with 4.3MM left to be issued.

6 As of June 3 rd, 2018 there are 1,880 cryptocurrencies with at total market cap of $352 Billion. (investing.com) Of those 1,880 not all are legitimate and the top 20 currencies account for 89% of the total market. (Motley Fool) The top six curriences are Bitcoin Litecoin Ethereum Zcash Dash Ripple

7 Blockchain Invented by Satoshi Nakamoto for bitcoin it has now becoming more widely accepted and used as a new type of internet security. Information held on a blockchain exists as a shared and continually reconciled database. Picture a spreadsheet that is duplicated thousands of times across a network of computers. Then imagine that this network is designed to regularly update this spreadsheet and you have a basic understanding of the blockchain. Think of Google docs with millions of users.

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9 People compete to mine bitcoins using computers to solve complex math puzzles. This is how bitcoins are created. Currently, a winner is rewarded with 12.5 bitcoins roughly every 10 minutes. This process requires massive systems and is unrealistic for the average investor.

10 Many marketplaces called bitcoin exchanges allow people to buy or sell bitcoins using different currencies. Coinbase is a leading exchange, along with Bitstamp and Bitfinex. Security can be a concern: bitcoins worth tens of millions of dollars were stolen from Bitfinex when it was hacked in 2016.

11 People can send bitcoins to each other using mobile apps or their computers. It s similar to sending cash digitally.

12 Bitcoin investors are of a fairly consistent demographic. 71 percent of them are male 58 percent -- are young, between the ages of 18 and 34 years old Nearly half of them are minorities. How many people own bitcoin? Due to anonymous nature its hard to predict. Somewhere between 13MM 30MM Popularity is exploding especially internationally

13 Lack of trust in current financial market Opportunity for investment return Avoid government regulations 70% say that the currency will be worth somewhat to significantly more five years from now. (Bloomber.com)

14 Demand and interest is growing Many early adopters have bought in while currency was still cheap and continued to buy. Resulting appreciation has created massive gains and value. Current value of one coin is?

15 $19,783 $8,113 $945.74

16 Emerging technologies begin with a breakthrough that triggers development Next, they enter a bubble period in which publicity creates overinflated expectations As the technology fails to live up to the hype, it falls into the Trough of Disillusionment Less committed investors and producers fail out of the sector, while others persist. The technology improves and becomes better understood. More applications emerge and some companies begin to adopt the technology Successful cases prove the technology s relevance and viability, resulting in mainstream adoption

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19 Who is accepting it? Wikimedia Foundation United Way Worldwide Red Cross KFC Canada Overstock.com Playboy Subway Eat fresh Microsoft Xbox Windows store Reddit Virgin Galactic Virgin Mobile Virgin Airline OkCupid Namecheap CheapAir.com Expedia.com Gyft Newegg.com Alza Bitcoin.Travel Many more

20 Can it be gifted? YES

21 Process is incredibly simple Create wallet Coinbase etc... You will need a EFT process established with your business office Provide donor with transfer link to your wallet They initiate the transfer on their side and you receive notification when it is complete

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23 Holding Bitcoin is a volatile investment with large swings happening frequently. I would strongly advise against holding If it becomes a true currency it will have to normalize and that will likely be at a much lower value Selling Recommend developing gift acceptance policy to treat like gifted stock. Sell within 3 days.

24 The IRS has stated that, for tax purposes, cryptocurrencies are considered assets and not currencies. This means that traditional gain and loss principles will apply for donors, and cryptocurrency donations to exempt non-profit organizations will not be considered taxable income when sold and exchanged for cash by the organization.

25 The size of the deduction depends on how they held the cryptocurrency: If they donate cryptocurrency that was held on a short term basis, meaning less than one year, they will be able to deduct the lesser of cost basis or fair market value up to 50% of adjusted gross income. If they donate cryptocurrency that was held for more than a year as a capital asset, the deduction would be the fair market value of the gift up to 30% of adjusted gross income. If the currency is subject to ordinary gain or loss treatment in the hands of the donor, the donor may deduct the cost basis of the gift up to 50% of her adjusted gross income.

26 The size of the deduction depends on how they held the cryptocurrency: From a tax perspective, your nonprofit organization would handle this very similarly to other non-cash assets: (Gift In-Kind) The IRS has classified cryptocurrency as property for federal income tax purposes. Therefore, the sale of the cryptocurrency, regardless of how long the property is held and regardless of any gains, is not taxable income. For recording purposes, if held, cryptocurrency should be treated as a financial asset and should be reported at fair value in your financial records. The fair value should be documented on the date of the transaction.

27 What is Bitcoin? (CNNtech) History of BitCoin (Motley Fool) Gifts of Virtual Currency Such as Bitcoin Some Considerations

28 Matt L. Wahrhaftig, CFRE Vice President for College Advancement Wilmington College 1870 Quaker Way Wilmington, OH O:

29 Thank You, Questions?